Mortgage bond prices finished the week near unchanged which kept rates in check. Trading was volatile despite no data until near the end of the week. News out of the Eurozone focused on Greece. Greece released a new reform plan in an effort to extend the bailout. Creditors wanted to see more concessions. Weekly jobless claims were 279K versus the expected 277K. The higher than expected reading was rate friendly. Retail sales rose 1.2% versus the expected 1.1% increase. This was not rate friendly. The Treasury auctions were generally solid. The data Friday morning was mixed. The Producer price index rose 0.5% versus the expected 0.4% increase. The Core, which excludes volatile food and energy, rose 0.1% as expected. The initial reaction was slightly negative. Mortgage interest rates finished the week flat from the week prior.
Fed Focus
The United States central bank, the Federal Reserve, coordinates the borrowing and lending activities of federally chartered banks. The principal reason the Federal Reserve was created was to reduce severe financial crises. One way of accomplishing this goal is to control the amount of money that flows through the economy. By manipulating the US money supply, the Fed influences inflation, unemployment, and the level of US economic activity. The Fed has a variety of tools that it uses to control the money supply, but its chief policy tool is the manipulation of short-term interest rates. No rate changes are expected at the Wednesday meeting next week but there is concern about the future. Many Fed officials have recently indicated a rate increases will occur this year. Their post meeting remarks will be carefully analyzed. Be cautious heading into this meeting.
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